How much energy is expended compressing the air in the first place though?
I suppose I should give Vinod the benefit of the doubt though, he's a smart cookie... I saw him speak at the SPARC 25 year celebration last week. He was one of the founding engineers at Sun Microsystems.

Sylvie, this is an energy storage scheme. Like batteries. The energy expended in compressing the air is the energy that is being stored, theoretically to become available when it's needed.
I've seen this idea pushed previously, for cars, believe it or not. Compressed air engines. As I see it, in cars anyway, the problem is that the scheme requires a lot more energy storage volume than the alternatives need to carry.
The gas equation is PV=nRT. And both this compressed air scheme and, say, internal combustion engines, follow Boyle's Law (P1V1 = P2V2).
So, both the ICE and the compressed air cycle work on the principle that you can derive power from expanding a compressed gas. However the ICE multiplies this effect many times, by the fact that the gas is mixed with a fuel, under pressure, and its temperature (and therefore pressure) spikes way up when the fuel-gas mix is ignited. Only then is it allowed to expand.
The compressed air engine doesn't have this combustion "multiplier effect." So you have to make up in volume and/or pressure what you are giving up in the temperature change available to the combustion engine, between combustion and exhaust.
Says to me that if you have room for large volumes, and also can accommodate pressures up to the thousands of PSI, this should be viable.

There is a Megawatt scale compressed air plant in the US in LA, or MS that has been in operation for over 20 years -- It is used to handle the peak daytime A/C load due to the suns heating everyones homes

I also does not see anythig special in this startup. Maybe someone's idea was that "energy storage" and "ecology" are popular, so it would be easier to find investors. Any physical material could be used for storing energy, it could be air, water or even sand. See http://en.wikipedia.org/wiki/Pumped-storage_hydroelectricity . Of course they could invent some new kind of pump, air tank or turbine, but those has anything to do with "energy storing".

Well, it appears as though her primary contribution was to convert adiabatic compression into isothermal compression using water as the heat-sink (and thermal storage). She then recovers the energy by re-injecting the heated water leveraging the heat of vaporization. Not to undermine her insight, but it's a fairly straight-forward application of thermodynamics.
Bits and pieces of this have been done in different forms for quite some time. However, her insight into being able to actually capture the excess energy (between adiabatic and isothermal) in the form of thermal storage, then recover it through a spray is clever.
She certainly has a good publicity manager...

Dear elektryk321:
You're right that there are many ways to store electrical energy, then release the stored energy in time of need.
The difficulty is economic: the released energy must be cheaper than generating the same amount of energy anew.
Suppose, instead of water, you spray gasoline into the compressed air to absorb heat. Then when energy is needed, you spray hot gasoline into the compressed air to recover most of the original stored energy.
Then you ignite the gasoline/air mixture to get the multiplier effect. So you'll probably recover 100 joules from 1 joule of the original stored energy.
The problem with this imaginary scheme is economic. The energy recovered this way probably costs more than Lightsail's.
And probably both schemes might (?) cost more than just generating anew the same amount as that saved energy, from dirty but dirt cheap coal!